London

Bank lending continues to fall

2010-02-03T06:00:00Z

According to Jones Lang LaSalle Q4 2009 Bank Lending Survey

According to Jones Lang LaSalle, the latest Bank of England lending figures show that bank lending in sterling to real estate over Q4 2009 continued its downward trend, having fallen for the first time since December 1997 in Q3 2009. Total lending dropped by £2bn to £242bn (including lending by building societies) compared to a £2bn growth over the same period in 2008. The year on year growth in the volume of real estate lending has fallen considerably, from £26bn in Dec 2008 to only £1.3bn in Dec 2009, the lowest growth recorded since June 1997.

Jeremy Handley, director in Jones Lang LaSalle’s Valuation Advisory team said: “Against the backdrop of a significant increase in investment activity, investment sentiment and increasing prices at the prime end of the market, the further reduction in outstanding debt might seem surprising. Many banks, particularly the German lenders, are now back in the market and finding that there is strong competition between banks to secure the best product. However, equity remains plentiful for the right opportunities and many vendors who are repaying debt are not re-leveraging in the short term leading to an overall reduction in debt levels. The real estate workout teams, while getting to grips with problem loans are not de-leveraging as much as many people expected which holding up the overall level of debt to the sector. Competition between banks is likely to put pressure on LTV and margins in the short to medium term.”

Jeremy concluded: “The most immediate issues for Real Estate debt remain the large increase in refinancings due in 2010 and 2001 and the number of CMBS maturities due. This has the potential to create significant pressure in the Real Estate banking sector while banks are reluctant to lend on secondary properties and poorer cashflows – an understandable reluctance whilst the occupational markets remain weak.”